Reliable Energy Ramps Up Production in 1Q
Reliable Energy reported its financial and operational results for the three months ended March 31, 2010.
FIRST QUARTER ACCOMPLISHMENTS
During the first quarter of 2010, Reliable continued to execute its business strategy that includes a balance of development and exploration drilling to increase production and cash flow, while continuing to add new reserves. Highlights in the quarter included:
- Drilling 9 gross (7.0 net) wells. Of the nine wells, 5 gross (4.0 net) development wells were drilled targeting the Bakken and subsequently placed on production. In addition, 4 gross (3.0 net) exploration wells were drilled into two South Kirkella pools and a new Manson pool targeting the Bakken and Lodgepole formations. All four wells were suspended and are awaiting completion operations following spring breakup.
- Improving average daily production to 307 boe/d, up 527% from a year ago and up 50% from the fourth quarter of 2009. Reliable exited the period at 367 boe/d.
- Increasing total undeveloped land holdings 80% to 77,200 net acres from 42,858 net acres a year ago. At Kirkella, the Company was successful in Crown land sales during the 2010 three-month period, and as a result, added an additional 8,000 net acres to its land inventory.
- Completing a 2-D seismic program covering 124 kilometres. As a result of the data interpretation, ten exploration prospects have been identified for drilling during the remainder of 2010.
- Achieving an operating netback of $52.55/boe, representing a 127% increase from $22.13/boe in the first quarter last year and a 6% increase from $49.35/boe in the final three months of 2009 due to higher crude oil prices and lower royalty costs. Following the construction of a new central battery and water disposal system on the Company's Kirkella South No. 1 pool, which is anticipated to be completed in July 2010, Reliable expects to further improve operating netbacks and efficiencies as well as reduce operating costs going forward.
The Company's strategy for the current year is focused on a balance of true exploration drilling (to discover new reserves) and development drilling (to increase production and cash flow), an approach aimed at maximizing shareholder value. In addition, the Company remains committed to increasing its presence at Kirkella by continuing to acquire lands on prospects that have been identified, through geology and geophysics, as having potential for light sweet oil in the Bakken, Lodgepole and Three Forks formations. To enhance success in its drilling program, Reliable believes that seismic data is essential for identifying new prospects and delineating discovered pools, and as a result, it has allocated approximately $1.2 million of its annual budget towards shooting and acquiring additional 2-D and 3-D seismic data. The Kirkella project area is currently comprised of 66,000 net acres of undeveloped land at 74% working interest with an exploration drilling inventory exceeding 16 wells.
On May 27, 2010, Reliable closed a bought deal financing with a syndicate of underwriters for gross proceeds of approximately $15.0 million, which was heavily oversubscribed. The financing, combined with available credit facilities and this year's annual projected cash flow of $8.1 million to $9.1 million, will enable the Company to expand its capital expenditure program for 2010, including potential horizontal drilling tests and a pilot water flood, aimed at further enhancing production and reserves in its core area.